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Medium-term planning for thermal electricity production

Raimund Kovacevic & Florentina Paraschiv

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abstract In the present paper, we present a mid-term planning model for thermal
power generation which is based on multistage stochastic optimization and involves stochastic electricity spot prices, a mixture of fuels with stochastic prices, the effect of CO2 emission prices and various types of further operating costs. Going from data to decisions, the first goal was to estimate simulation models for various commodity prices. We apply Geometric Brownian motions with jumps to model gas, coal, oil and emission allowance spot prices. Electricity spot prices are modeled by a regime switching approach which takes into account seasonal effects and spikes. Given the estimated models, we simulate scenario paths and then use a multiperiod generalization of the Wasserstein distance for constructing the stochastic trees used in the optimization model. Finally, we solve a 1-year planning problem for a fictitious configuration of thermal units, producing against the markets. We use the implemented model to demonstrate the effect of CO2 prices on cumulated emissions and to apply the indifference pricing principle to simple electricity delivery contracts.
   
type journal paper
   
keywords Multistage stochastic programming, Tree generation, Electricity production, Modeling commodity spot prices
   
language English
kind of paper journal article
date of appearance 2014
journal OR Spectrum
publisher Springer Verlag (Heidelberg)
ISSN 0171-6468
ISSN (online) 1436-6304
DOI 10.1007/s00291-013-0340-9
volume of journal 2014
number of issue forthcoming, online seit 08.13
page(s) 1-37
review double-blind review
   
profile area SEPS - Quantitative Economic Methods
citation Kovacevic, R., & Paraschiv, F. (2014). Medium-term planning for thermal electricity production. OR Spectrum, 2014(forthcoming, online seit 08.13), 1-37, DOI:10.1007/s00291-013-0340-9.